Internal audit operations for sarbanes oxley compliance

ABSTRACT

A system provides audit opinions on an enterprise&#39;s organizations, processes, risks, and risk controls. The system first evaluates the enterprise&#39;s set of risk controls. The audit opinions of the set of risk controls are used to evaluate the set of risks associated with the set of risk controls. The audit opinions of the set of risks and of the set of risk controls are in turn used to evaluate the set of processes associated with the set of risks. Finally, all of these audit opinions are used to evaluate the set of organizations associated with the set of processes. The system streamlines the evaluation of risk by determining suggested audit opinions. Suggested audit opinions for a given item can be determined from audit opinions previously determined and associated with the given item. Rules can be defined for a given item to specify how to determine the suggested audit result.

CROSS-REFERENCES TO RELATED APPLICATIONS

This application is related to U.S. patent application Ser. No.10/464,417 filed Jun. 17, 2003, Ser. No. 10/464,815 filed Jun. 17, 2003,Ser. No. 10/464,421 filed Jun. 17, 2003, Ser. No. 10/464,874 filed Jun.17, 2003, Ser. No. 10/464,875 filed Jun. 17, 2003, and Ser. No.10/464,055 filed Jun. 17, 2003, and are incorporated by reference hereinfor all purposes.

BACKGROUND OF THE INVENTION

The present invention relates to the field of software applicationsgenerally, and specifically to the implementation of financialapplications. The corporate accounting scandals surrounding WorldCom,Enron and Tyco in 2002, have spurred the passage of the Sarbanes-OxleyAct of 2002. The Act creates an obligation for officers of a company towarrant to their shareholders the accuracy of the company's accountinginformation, the controls in place to safeguard the assets of thecompany, and the validity of the financial statements they produce.Although these obligations have previously existed in a weaker form inthe United States, the advent of the Sarbanes-Oxley Act has made theseobligations much stronger. Any company that is listed on an Americanstock exchange has these obligations.

The Act codifies a framework for internal accounting controls specifiedby the committee of Sponsoring Organizations of the Treadway Commission(COSO). COSO establishes three categories of controls: Effectiveness andEfficiency of Operations; Reliability of Financial Reporting; andCompliance with Laws and Regulation. COSO also establishes fiveinterrelated components of effective internal control: ControlEnvironment; Risk Assessment; Control Activities; Information andCommunications; and Monitoring. In summary, the methodology prescribedby COSO includes identifying the opportunities for fraudulent reporting,determining the risks arising from these opportunities, and thenproviding accounting controls to mitigate these risks.

Because company officers are responsible under the Sarbanes-Oxley Actfor warranting the accuracy of their company's accounting information,company officers depend on their auditors to investigate and resolveaudit issues. To provide company officers with an adequate basis forwarranting the accuracy of their company's accounting information,auditors need to develop audit opinions for all of the organizations,processes, risks, and risk controls in the company. Previously, auditoperations have not be structured towards the requirements of theSarbannes-Oxley Act. Thus, auditors must perform a traditional audit ofthe company and then repurpose these audit results to the structure ofthe Sarbannes-Oxley Act. Company officers can then review the auditor'sevaluations of the organizations, processes, risks, and risk controls inthe company to decide whether to warrant the company's accountinginformation. The process of repurposing accounting information to thestructure specified by the Sarbannes Oxley Act is time-consuming andauditors may omit or overlook crucial aspects of a company.

It is therefore desirable for an audit system to provide a logical andstructured system to evaluate an enterprise and provide audit opinionson the organizations, processes, risks, and risk controls. It is furtherdesirable for the audit system to facilitate the evaluation of allaspects of an enterprise in a uniform manner. It is also desirable forthe audit system to streamline the creation of audit opinions.

BRIEF SUMMARY OF THE INVENTION

In an embodiment, a structured system for conducting audit operationsprovides audit opinions on an enterprise's organizations, processes,risks, and risk controls. The system first evaluates the set of riskcontrols of an enterprise. The audit opinions of the set of riskcontrols are used to evaluate the set of risks associated with the setof risk controls. The audit opinions of the set of risks and of the setof risk controls are in turn used to evaluate the set of processesassociated with the set of risks. Finally, all of these audit opinionsare used to evaluate the set of organizations associated with the set ofprocesses. The system streamlines the evaluation of risk by determiningsuggested audit opinions. Suggested audit opinions for a given item canbe determined from audit opinions previously determined and associatedwith the given item. Rules can be defined for a given item to specifyhow to determine the suggested audit result.

In another embodiment, a method of auditing an enterprise comprisesevaluating a set of risk controls associated with the enterprise toproduce a first set of audit opinions, evaluating a set of risksassociated with the set of risk controls to produce a second set ofaudit opinions, evaluating a set of processes associated with the set ofrisks to produce a third set of audit opinions, and evaluating a set oforganizations associated with the set of processes to produce a fourthset of audit opinions.

In an additional embodiment, evaluating the set of risks includesdetermining a suggested audit opinion from a selection of audit opinionsincluding at least a portion of the first set of audit opinions.Furthermore, determining the suggested audit opinion may includeapplying a rule to the selection of audit opinions. The rule may includea weighted combination of a set of risk mitigation values associatedwith the selection of audit opinions.

In a further embodiment, evaluating the set of processes includesdetermining a suggested audit opinion from a selection of audit opinionsincluding at least a portion of the first and/or second set of auditopinions. Determining the suggested audit opinion may include applying arule to the selection of audit opinions. The rule may include a weightedcombination of a set of risk severity values associated with at least aportion of the selection of audit opinions.

In yet another embodiment, evaluating the set of organizations includesdetermining a suggested audit opinion from a selection of audit opinionsincluding at least a portion of the first, second, and/or third set ofaudit opinions. In yet a further embodiment, the method includesreceiving audit decision from a user. The audit decision indicateseither the acceptance of the suggested audit opinion or the rejection ofthe suggested audit opinion. The method may also include storing thesuggested audit opinion and the audit decision.

BRIEF DESCRIPTION OF THE DRAWINGS

The present invention will be described with reference to the drawings,in which:

FIG. 1 is a block diagram of a system for implementing an embodiment ofthe invention;

FIG. 2 is a block diagram illustrating a set of applications and dataobjects used by an embodiment of the invention;

FIG. 3 is a block diagram illustrating an embodiment of the invention;

FIG. 4 is an example screen display of an embodiment of the invention;

FIG. 5 is a block diagram of the user interface of an embodiment of theinvention;

FIG. 6 is a block diagram of a method for creating a business processaccording to an embodiment of the invention;

FIG. 7 is a block diagram of a portion of an embodiment of the inventionfor monitoring the performance of a business process;

FIG. 8 is a block diagram illustrating the association of a businessprocess with process risks, controls, and control reports according toan embodiment of the invention;

FIG. 9 is a block diagram of a portion of an embodiment of the inventionfor approving a variation of a business process;

FIG. 10 is a block diagram of a portion of an embodiment of theinvention for creating an impacted financial statement;

FIG. 11 is a block diagram illustrating a set of data objects used by anembodiment of the invention;

FIG. 12 illustrates a block diagram of a hosted audit service accordingto an embodiment of the invention;

FIG. 13 illustrates a registry of incompatible functions according to anembodiment of the invention;

FIGS. 14A and 14B illustrate risks associated with pairs of incompatiblefunctions;

FIG. 15 illustrates an example screen display of an audit system thatsummarizes an audit according to an embodiment of the invention;

FIG. 16 illustrates an example screen display of an audit system thatsummarizes audit information by financial account according to anembodiment of the invention;

FIG. 17 illustrates an example screen display of an audit system thatsummarizes audit information by organization according to an embodimentof the invention;

FIG. 18 illustrates an example screen display of an audit system thatenables a company officer to certify audit results according to anembodiment of the invention;

FIGS. 19A-H illustrate a set of example screen displays of an auditsystem that enables the creation of a survey according to an embodimentof the invention;

FIG. 20 illustrates an example screen display of an audit systempresenting a survey according to an embodiment of the invention; and

FIGS. 21A-B illustrate a set of example screen displays of an auditsystem presenting an assessment of an enterprise according to anembodiment of the invention;

FIG. 22 illustrates is a block diagram illustrating an embodiment of theinvention;

FIGS. 23A-B illustrate an example correlation between survey questionresults and audit results according to an embodiment of the invention;and

FIG. 24 illustrates a flowchart for audit operations according to anembodiment of the invention.

In the drawings, the use of like reference numbers in different drawingsindicates similar components.

DETAILED DESCRIPTION OF THE INVENTION

The present invention enables auditors to efficiently and effectivelyaudit the business processes of an enterprise. An embodiment of theaudit system: 1) configures and implements audit processes; 2)determines the set of risks associated with the business processes of anenterprise; 3) applies a set of controls to the business processes of anenterprise to mitigate the set of associated risks; 4) continuouslymonitors the effectiveness of a set of controls; 5) determines whenbusiness processes used by an enterprise have deviated from a modelprocess; 6) certifies new business processes; 7) integrates businessprocesses and their associated risks and controls with financialstatements; 8) creates audit procedures to be followed by auditors andemployees to implement audit processes; and 9) verifies propersegregation of incompatible functions. An embodiment of the audit systemincludes a hosted service that provides auditors with a set of auditprocedures and enables auditors to track compliance with theseprocedures for a set of standard business processes.

FIG. 1 is a block diagram of a system 100 for implementing an embodimentof the invention. System 100 includes user computers 105, 110, and 120.User computers 105, 110, and 120 can be general purpose personalcomputers having web browser applications. Alternatively, user computers105, 110, and 120 can be any other electronic device, such as athin-client computer, Internet-enabled mobile telephone, or personaldigital assistant, capable of displaying and navigating web pages orother types of electronic documents. Although system 100 is shown withthree user computers, any number of user computers can be supported.

A web server 125 is used to process requests for web pages or otherelectronic documents from user computers 105, 110, and 120. In anembodiment of the invention, all user interaction with the audit systemis via web pages sent to user computers via the web server 125.

Web application server 130 operates the audit system. In an embodiment,the web application server 130 is one or more general purpose computerscapable of executing programs or scripts in response to the usercomputers 105, 110 and 115. The web application can be implemented asone or more scripts or programs written in any programming language,such as Java™, C, or C++, or any scripting language, such as Perl,Python, or TCL.

In an embodiment, the web application server 130 dynamically creates webpages for displaying the audit system and audit output data. The webpages created by the web application server 130 are forwarded to theuser computers via web server 125. Similarly, web server 125 receivesweb page requests and audit input data from the user computers 105, 110and 120, and forwards the web page requests and audit input data to webapplication server 130.

As the web application on web application server 130 processes auditdata and user computer requests, audit data can be stored or retrievedfrom database 135. Database 135 stores general audit data used by everyuser for every audit in the enterprise. Database 135 also stores auditdata associated with individual audits and/or individual users of theaudit system. In an embodiment, the web application on the webapplication server 130 can retrieve any previously stored data from themodel database 135 at any time. This allows users to modify or updateaudit data.

An electronic communication network 120 enables communication betweencomputers 105, 110, and 115, web server 125, web application server 130,and database 135. In an embodiment, network 120 may further include anyform of electrical or optical communication devices, including wirelessand wired networks. Network 130 may also incorporate one or morelocal-area networks, such as an Ethernet network; wide-area networks,such as the Internet; and virtual networks, such as a virtual privatenetwork.

The system 100 is one example for executing an audit system according toan embodiment of the invention. In another embodiment, web applicationserver 130, web server 125, and optionally model database 135 can becombined into a single server computer system. In alternate embodiment,all or a portion of the web application functions may be integrated intoan application running on each of the user computers. For example, aJava™ or JavaScript™ application on the user computer is used to processor store audit data or display portions of the audit application.

FIG. 2 is a block diagram 200 illustrating a set of applications 205 anddata objects used by an embodiment of the invention. The set ofapplications 205 include a database 210, a web server 215, and anapplication server 220, similar to that discussed above. Additionally,the set of applications include a notification system 230, a workflowsystem 235, and a set of workflow-enabled applications 240.

The notification system 230 enables communication between audit systemusers and the audit system. Communications can be in the form ofelectronic messages such as electronic mail and instant messages. Thenotification system 230 can be used to gather data and to distributeinformation or instructions from audit system users or otherindividuals. Communications can include forms or questionnaires to becompleted by recipients. Users return the completed form to thenotification system 230. The notification system 230 then processes thecompleted forms to extract the data provided by users. The notification230 can transfer extracted data to any of the other applications or toother audit system users.

The workflow system 235 enables the implementation of businessprocesses. A business process is a planned series of work activities,referred to as business functions, with defined inputs and results. Theworkflow system allows business processes to be defined for any of theoperations of a business enterprise. A business functions can define thebusiness functions needed to complete an operation, the personnelresponsible for performing each of the business functions, and theinputs and outputs of each of the business functions. Business processescan include conditional branches, so that different business functionsare performed in response to the result of one or more previous workactivities. In an embodiment, the workflow system 235 has a graphicaluser interface for visually defining a business process or a businessfunction in a manner similar to drawing a flowchart.

In an embodiment, the workflow system 235 is linked to a set ofworkflow-enabled applications. In this embodiment, the workflow system235 is not only a drafting tool for defining business process, but alsodirectly controls the operations of the workflow-enabled applications.Each business function in the business process is linked to anunderlying function of a workflow-enabled application. Selecting abusiness function in a business process invokes the associated functionof the workflow-enabled application.

For example, a business process can define the business functions to befollowed to pay an invoice can be linked to a workflow-enabled accountspayable application. The workflow-enabled accounts payable applicationwill operate according to the business process defined by the workflowsystem. If, for example, the workflow system specifies that invoicesover a threshold amount, for example $100,000, be routed to a seniormanager for approval, while invoices under this threshold can beapproved by a junior manager, then the workflow-enabled accounts payableapplication will route all invoices received according to this criteria.In a further example, the notification system 230 can be used to routeinvoices and collect approvals as specified by the business process.

In a further embodiment, a business function of a business processrepresents a collection of related sub-functions, each representing adifferent work activities, or alternately represent a single workactivity. For example, a procurement to payment business process candefine the work activities used by an enterprise to procure and pay forbusiness supplies. Examples of business functions within the procurementto payment process may include a procurement function to requestbusiness supplies, a receiving function to handle receipt of thebusiness supplies, and a payables function to pay for the suppliesfollowing delivery. Each of these business functions can have numeroussub-functions. For example, the procurement function can havesub-functions for soliciting bids, evaluating bids from suppliers, andultimately selecting a winning bid.

In yet a further embodiment, business functions representing acollection of related sub-functions may correspond with menus ofworkflow-enabled applications. Employees assigned to a specific businessfunction will have access to the corresponding menu in workflow-enabledapplications and any of the collection of related sub-functions can beactivated via the menu. Conversely, an employee will be unable to accessa menu of a workflow-enabled application corresponding with a businessfunction not assigned to the employee.

The set of workflow-enabled applications can include applicationsadapted to a variety of business operations, including purchasingapplications, such as Oracle Purchasing, general ledger applications,such as Oracle General Ledger, project management applications, such asOracle Projects, accounts payable and receivable applications, such asOracle Payables and Oracle Receivables, human resources applications,such as Oracle Human Resources, account generation applications, such asOracle Account Generator, service applications, such as Oracle Service,engineering management applications, such as Oracle Engineering,inventory applications, such as Oracle Inventory, web employeeapplications, such as Oracle Web Employees, web customer applications,such as Oracle Web Customers, web supplier applications, such as OracleWeb Suppliers, and implementation applications, such as OracleImplementation Wizard.

In addition to the set of applications 205, a set of data objects areused by the audit system. A process library 250 is a set of businessprocesses implemented in the workflow system 235 and, in an embodiment,associated with workflow-enabled applications 240. A typical processlibrary can include over one thousand different business processes.Business processes can be generally applicable to all businesses, orspecific to a certain type of business or industry.

A set of process risks 265 are associated with the business processes ofthe process library. A process risk is an undesirable outcome of abusiness process. Risks can result from a variety of sources, includingfrom employees failing to follow the steps of a business process, frommistakes or wrong decisions made by employees, from employeemalfeasance, and from business effects, such as customers failing to paybills. Risks can be classified into categories, such as the type ofrisk, the organizations affected by the risk, and the severity of therisk. Each business process can be associated with one or more processrisks, and conversely, each process risk can be associated with one ormore business processes.

A set of process controls 255 are associated with the set of processrisks 265 and the business processes of the process library 250.Controls are additional processes, conditions, and/or notificationsintended to mitigate the associated risks. A control can be a manualcontrol instructing an employee to verify a physical condition. A manualcontrol can be implemented using the notification system. For example,control may require that a signature file or other valuable item besecured in a safe. In this example, the notification system will send averification request to a trusted employee. The trusted employee willcheck to ensure the item is secured, and then respond to theverification request. The notification system will record the employee'sverification for future reference.

A control can also be another business process implemented by one ormore workflow-enabled applications. For example, an invoice control canbe a two-, three-, or four-way matching of a received invoice with apurchase order, an inventory record for the associated item, and/or anacknowledgement of the acceptance of the item. These matching operationscan be defined as a business process in the workflow system and executedby the functions of underlying work-flow enabled applications.

A set of process procedures 260 is associated with the other dataobjects. The process procedures provide documentation for performing thebusiness processes of the process library 250. A typical set ofprocedures can include hundreds of different procedures for performingall or portions of the different types of business processes. Theprocess procedures provide documentation to employees assigned toperform all or a portion of a business process on the appropriate way toperform their assigned tasks. In an embodiment, a procedure can beassociated with more than one type of business process. Additionally,the set of process procedures 260 include audit procedures for auditingthe business processes. The audit procedures are associated with one ormore business processes of the process library 250. The audit proceduresprovide auditors with documentation for auditing the associated businessprocess. Auditors assigned to a specific business process can retrievethe appropriate audit procedures from the set of process procedures 260.

FIG. 3 is a block diagram 300 illustrating an embodiment of theinvention. A set of data objects and core applications, such as thatdiscussed in FIG. 2, is interfaced with an audit manager 305.

The audit manager 305 provides a central interface to all audit relatedtasks in an enterprise. The audit manager 305 enables auditor to developa picture of the processes of the company, similar to the library neededfor ISO 9000 compliance audit. The audit manager 305 allows processes tobe viewed and decomposed into many levels.

Additionally, as part of the internal audit function is maintaining therelationship between a business process and the financial accounts thatit impacts. For example, the Order to Cash process affects the Revenue,Deferred Revenue, Cost of Goods Sold, Finished Goods Inventory, andAccounts Receivable Control accounts. The audit manager 305 enables anauditor to efficiently view a business process and its associatedfinancial accounts.

The audit manager 305 enables auditor to associate risks for eachprocess and the controls that mitigate each risk. The audit manager 305can associate controls in the form of additional workflows or businessprocesses to manage a risk. For example a control can enable processessuch as profit screening or notification of a low margin order tofinance ratio. As discussed below, controls can be continuouslymonitored for variances in Key Performance Indicators (KPI) recorded ina Performance Management Framework (PMF). Each KPI can have associatedcontrol limits or tolerances. If a process exceeds any of its KPI, anaudit function or process can be automatically initiated by the auditmanager 305.

An additional type of control risk arises from insufficient segregationof duties. If too many workflow activities are concentrated in a singleperson, the chance of employee errors or malfeasance going undetected isgreatly increased. The audit manager 305 enables auditors to confirmthat there are no employees that have access to pairs or groups offunctions that are inconsistent with good internal controls. An exampleof functions that should be segregated are authorizing new suppliers andauthorizing checks. As business processes are created, segregatedfunctions are identified. The audit manager accesses the organizationalstructure of the enterprise to ensure that segregated function are notperformed by the same person.

The audit manager 305 also includes project templates defining standardaudit procedures for each business process. In an embodiment, theproject templates for audit procedures are defined in a workflow-enabledproject management application linked with the business process in theworkflow system. In this embodiment, the project templates for auditinga business process are workflows defined by the workflow system. Anaudit project template can include standard audit procedures, documenttemplates, and standard deliverables needed for an audit of anassociated business process. The audit manager 305 is interfaced with aworkflow-enabled project management application to enable collaborationbetween auditors by providing planning functions, task assignmentfunctions, progress tracking functions, communication functions, anddocument management functions. Task assignment functions enable theproject management application to locate available people with the skillset to match assignments. Progress tracking functions enable the projectmanagement function to monitor progress against milestones.

When initiating an audit of a business process, the audit manager 305uses the project management application to create an audit project fromthe appropriate audit project template. Audit project can be initiatedas a scheduled activity or as the result of an trigger event, such as alarge accounts receivable write off. As discussed elsewhere, theperformance management framework enables auditors to continuouslymonitor Key Performance Indicators (KPI) to determine if a triggercriteria has fallen out of tolerance.

The audit manager 305 executes the audit project using the functions ofthe underlying project management application. The audit manager usesthe project management application to record audit issues warrantingfurther investigation, to record follow ups to audit issues, and toresolving an audit opinion differences, which exist when two auditorshave differing opinions on whether a process is in control or not. In anembodiment, a threaded discussion capability, included as part of thenotification system, is used to resolve audit opinion differences. Theaudit manager 305 can store and manage supporting documentation in adocument management system. The supporting documentation may bereferences to transactions or electronic documents, including documentsdeveloped in other tools such as spreadsheets, review notes, scanneddocuments, and other portable document formats.

The audit manager 305 also employs specialized computer-aided audittools. Examples of these tools include risk assessment tools such asRatio Calculators, Anomaly Detectors, Sampling Methods, Process ControlsReports, and Fraud Detectors. A fraud detector is a tool used to detectsuspicious transactions, such as identifying people who submitted morethan one expense report for a given week or expense reports with morethan $100 of expenses without receipts.

The audit manager 305 further includes audit functions linked tostandard financial reports, such as Subledger to General LedgerIntegrity or Profit Reconciliation. Audit functions can also be linkedto compliance reports, which guide the auditor through checkingcompliance with regulations like SOP 97-2, or checking contingentliabilities from a supply contract. Audit functions can also be linkedto IT reports. For example, an IT report can identify users authorizedto create payables invoices.

An embodiment of the audit manager 305 is tightly integrated with theworkflow system and the workflow-enabled applications. As a projectstatus is changed or task is changed a workflow is initiated andreviewers and approvers of the project are notified by the notificationsystem, for example by e-mail. The audit project status can be linked tothe final audit opinion, so that the notification system automaticallynotifies the appropriate people of the audit finding.

An embodiment of the audit manager 305 also integrates with a mappingbetween the organization units in an enterprise and the businessprocesses that they perform. As each organization may be running aslight variation of a standard business process, the audit managerincludes a process change monitor and process certification manager,discussed below, to identify process variations and to ensure that eachorganizations' business processes are approved. Additionally, the auditmanager 305 can associate an audit schedule with an organization basedupon the mapping of business processes to the organization. For example,an Accounts Receivable process might require auditing every 6 months.Based upon the mapping between organizational units and businessprocesses, the audit manager identifies organizational units that employthe Accounts Receivable process and automatically schedule auditprojects for these organizational units.

As discussed above, the Sarbanes-Oxley Act requires corporations toconduct surveys of management and to enable anonymous reporting ofpotential problems. An embodiment of the audit manager 305 includes asurvey facility to survey management on their opinion of the adequacy ofinternal controls and to enable anonymous “whistleblower” reporting. Thesurvey facility employs the notification system. Survey users can routetheir responses to one or more specific organizational levels, to ensurethat an issue receives appropriate attention. Like audit issues, thenotification system can track follow-up responses to a survey issue in athreaded message format, and survey respondents can anonymously viewfollow-ups to their issues and can anonymously add their own follow-upresponses.

The audit manager 305 includes a number of supporting modules forperforming audit-related tasks. These modules work in conjunction withthe audit manager 305 and include an audit control performance monitor315, a process change monitor 320, a hosted audit service 325, a processcertification manager 330, and an impacted financial statements manager335. The operation of these modules will be discussed in detail below.

FIG. 4 is an example screen display 400 of an embodiment of the auditmanager. In an embodiment of the invention, screen display 400 ispresented to a user via a web browser. Screen display 400 includes tabs400, 410, 415, 420, and 425 for navigating between sets of auditfunctions and audit information. By selecting a different one of thetabs, the user is presented with a different set of audit functions andaudit information.

Home tab 405 corresponds to a default, or home, display where relevantdaily information is presented to users. In FIG. 4, the screen display400 corresponds to an example home page, and the Home tab 405 is shadedto indicate to the user that the home page is the current display.

The home page includes a notifications section 430 displaying a subsetof the audit issues and audit tasks to be performed by the user. Thehome page is personalized for each user, so that each user is presentedwith relevant audit issues and tasks. The notifications section 430 caninclude alerts to any outstanding follow up actions that have not beenimplemented, to any processes that have fallen outside of acceptableperformance limits, and to any organization units that are due an auditaccording to the audit schedule of the organization.

The Business Processes tab 410 enables auditors to document the businessprocesses and relevant surrounding information to be audited. The AuditTab 415 enables auditors to define standard audit workflows for theaudit of specified Business Processes, Audit Approaches and Lines ofBusiness. The Management Tab 420 enables the manager of the auditdepartment to plan the resources and skills needed for audit projects.The Set Up Tab 425 enables the manager of the audit department to setthe audit schedule for the Business Processes and to assign the businessprocesses to organization units. Tabs 410, 415, 420, and 425 arediscussed in more detail below.

A search function 435 enables audit managers to search for auditrelevant information using the search box. Auditors can search forinformation by business process, auditor, a standard workflow, an auditproject, a procedure in the standard procedures manual, or a predefinedrisk.

The home page also presents frequently performed tasks and functions inthe Quick Links section 440. In display 400, the Quick Links sectionincludes task such as initiating a survey of management's assessment ofthe effectiveness of internal controls, initiating a new audit project,requesting follow up on a particular audit issue, and recording a newaudit issue.

FIG. 5 is a block diagram 500 of the user interface of an embodiment ofthe invention. Block diagram 500 illustrates the user-interface tabsdiscussed above and their associated sub-functions. FIG. 5 is providedto explain the functions of the invention in an organized fashion andalternate embodiments of the invention may arrange these functionsdifferently.

The business processes tab 504 include processes selection 506 forviewing details of one or more business processes. As discussed above,an embodiment of the invention employs the workflow system not only as adrafting tool for the designer of the business process, but also as theactual implementation of the business process. The processes selection506 enables access to the database of business processes and processactivities. In an embodiment, the business processes are displayed inthe menu system. Users can navigate to different processes and invoketheir underlying functions in workflow-enabled applications. Businessprocesses can reference other business processes.

Before being deployed by an enterprise, business process need to becertified. Certification ensures that the process complies with thestandards of the enterprise. In an embodiment, selection 506additionally displays the certification status of a business process.Example values of certification status include “Requested”, whichindicates that certification is requested, “Certified,” which indicatesthat the manager or employee responsible for a process has certifiedthat this process has been approved, and “Attested,” which indicatesthat an auditor has verified the adequacy of the controls of a businessprocess.

A “Request Certification” function is provided by selection 506 toinitiate certification of a business process. The certification functionsends a notification to all process owners, who are managers responsiblefor all or a portion of a process, to certify the business processeshave adequate internal controls. Process owners of higher levelprocesses can review the certification status of subsidiary processes aspart of their own certification process. The responses of thesenotification are processed to determine the certification status of thebusiness process.

Selection 510 displays procedures associated with business processes. Asdiscussed above, a set of procedures are associated with businessprocesses. These procedures can be modified to fit the needs of theenterprise. In a further embodiment, the procedures are integrated witha workflow-enabled training application, such as Oracle iLearning.Employees are trained in procedures by the training application. In thisembodiment, selection 510 allows auditors to track the progress ofemployees in studying the procedures.

Selection 514 displays risks associated with business processes. TheRisks selection 514 from within the Processes tab 506 displays the risksthat relate to the each business process in a table. In an embodiment,each risk is classified according to its probability and impact. Forexample, the risk of a loss making order being accepted may have a lowprobability and a high impact. Similarly, the risk of a salespersonaccepting a kickback from a distributor may have a high probability anda low impact. Users can select risks from within the table and reviewthe controls that apply to that risk. Users can create a new associationbetween an existing risk and a business process, or add a new risk andassociate the risk with one or more business processes.

Selection 516 displays the controls used to mitigate risks associatedwith the business processes. For example, one risk associated with theorder to cash cycle might be the risk of customer default. Controls thataddress this risk might include setting approval limits for creditgranting authority, ensuring the separation of duties between sales andcredit management, and setting credit holds if an account is over 45days past due. Each of these controls can be associated with one or morerisks, or vice-versa.

In an embodiment, controls are of one of three general types. First,audit trigger events are controls that trigger audit events in responseto variances in control limits or tolerances monitored by theperformance management framework.

Second, workflow definition controls are additional workflow processesor sub-process integrated with the workflow of a business process tomitigate an associated risk. For example, a workflow definition controlfor a sales quotation process adds functions that perform profitscreening or notification of a low margin order to finance. If a salesquotation business process is implemented by a workflow-enabledapplication, then the workflow definition controls will automaticallyimplemented by the workflow-enabled application.

Third, controls can be included in profiles and system options. Thesecontrols change the settings or configuration of one or moreworkflow-enabled applications to implement a control.

An embodiment of the selection 516 displays controls within a table.Users can select controls and review the risks associated with eachcontrol. Users can also select controls and view the associated businessprocesses. Users can create a new association between an existingcontrol and a risk, or add a new control and associate the control withone or more risks.

Selection 512 displays financial items associated with businessprocesses. A desirable result of auditing is determining therelationships between business processes and the key financial accountsthey impacts. For example, the Order to Cash process effects theRevenue, Deferred Revenue, Cost of Goods Sold, Finished Goods Inventory,and Accounts Receivable Control accounts. Verifying the balances in anaccount requires an understanding of the processes affecting the accountand the risks associated with these processes.

Selection 512 enables auditors to associate business processes to one ormore key accounts. Auditors can then view financial accounts todetermine the set of business processes, risks, or controls associatedwith each account.

In an embodiment, an impacted financial statement can be created fromthe set of business processes, risks, and controls. An impactedfinancial statement is a financial report, such as a balance sheet,annotated with information from the set of business processes, risks,and controls. A user can view the impacted financial statement as anelectronic document. By selecting one or more line items on the impactedfinancial statement, users can view the risks, controls, and processesimpacting the selected line.

A further embodiment of the invention can import financial data, such asaccount information, as XML files employing a standard XML schema forfinancial data. One such scheme is the XBRL standard taxonomy. The XMLfile is parsed to identify the financial accounts. Information from eachidentified financial account is then matched with the financialinformation associated with the set of business processes. An impactedfinancial statement is then created by combining the account informationfrom the XML file with the associated business processes.

Selection 518 enables auditors to monitor the effectiveness of controls.The Audit manager utilizes the Performance Management Framework (PMF)integrated with a set of workflow-enabled applications to assign processobjectives to a business process. The PFM can define process objectivesas either control objectives or performance objectives. For example, theAccounts Receivable Department of a company may have performanceobjectives that are consistent with minimizing working capitalrequirements. An example of a performance objectives might be tominimize Days Sales Outstanding. The accounts receivable department mayalso have control objectives that are consistent with separation ofcredit granting authority and sales commitments. An example of a controlobjective might be to minimize Costs of Bad Debt.

The PFM enables users to associate one or more key performanceindicators (KPI), which are quantitative measurements of compliance witha control or performance objective, to a business process. KPI can alsobe associated with controls to monitor risk mitigation. Each KPI has adesired objective value. The PFM continuously monitors the KPI fordeviations from the desired objective value. Any deviations in KPIvalues outside a defined tolerance value triggers an audit event.

Selection 518 allows auditors to review the control and performanceobjectives associated with a business process, and enables auditors toadd additional control and performance objectives in the form of KPI tobusiness process. This allows auditors to determine whether control andperformance objectives are in place to allow management to see if itsobjectives are being met. By integrating the PFM with the businessprocesses defined by the audit manager, the audit manager enablesmanagers and auditors to monitor the enterprise's performance withregard to both process objectives and risk mitigation.

Risks selection 520 displays similar information as selection 514, butwith the information orientated to display processes associated witheach risk, rather than the risks associated with each business process.Risk selection 520 also displays controls associated with each risk,similar to selection 516, but with the information orientated ascontrols associated with each risk, rather than the controls associatedwith each business process. Risks selection 520 also includes a riskssearch page enabling users to search for risks by name, process type,risk category, impact category, line of business, financial statement,and financial item. Risk selection 520 also enables auditors to navigatea hierarchical tree to locate a specific risk. Risks selection 520further enables auditors to add or delete risks.

Selection 522 displays the controls associated with business processes,similar to selection 516, but orientated to display the risk and/orbusiness processes associated with each control. Selection 522 enablesauditors to add or delete controls. Selection 522 also includes acontrol search function to search for controls by name, process type,risk category, impact category, line of business, financial statement,and financial item. Control selection 522 also enables auditors tonavigate a hierarchical tree to locate a specific control.

Additionally, if the control is associated with a performance or controlobjective, auditors can view a list of the KPI that have been createdfor the organization. Similarly, if the control is a workflow definitioncontrols, auditors can view business processes associated with thecontrol. If the control type is a system option, auditors can view alist of profile options and system option for the workflow-enabledapplication running the process. If the control type is a manualcontrol, the text of the manual control can be viewed by the auditor.

Control reports selection 524 enables auditors to review the control andperformance objectives associated with a business process, and to addadditional control and performance objectives in the form of KPI tobusiness process, similar to selection 518. However, selection 525orientates information to display the business processes associated witheach control or performance objective, rather than the control andperformance objectives associated with each business process.

Audit Tab 520 enables auditors to create the audit projects, to recordthe activities of the audit project as it executes, and finally to issuethe audit opinion and audit summary report. When a specific auditproject is undertaken, either as a scheduled activity or as the resultof an trigger event, (such as a large accounts receivable right off),the audit project is created from an audit project template for thebusiness flow being audited. For example, if the business flow beingaudited is Order to Cash, the order to cash audit project template isused. The tasks required to audit the process risks of the Order to Cashprocess are also in the audit project template. The reports that verifythe controls are in place can be referred to from within the auditproject template.

Once an audit project is initiated, auditors can locate available peoplewith the skill set to match the assignment. Once underway, auditprojects can be monitored for progress against project milestones. Underthe Audit tab 526, auditors can perform functions related to performingand recording their work, such as record audit issues, assigning followup actions, attaching supporting documentation, and conducting threadeddiscussions. Additional specialized reporting is provided either onrequest or distributed through audit participants to both issue theaudit opinion on completion or issue the audit summary report.

Audit tab 526 also provides auditors with specialized computer-aidedaudit tools including: Ratio Calculators, Anomaly Detectors, SamplingTools, Legal Compliance Check Reports, Contract Contingency CheckReports, Process Control Reports, and Fraud Detectors.

The audit tab 526 also provides questionnaires to confirm anenterprise's contingency planning for continuance of operations. Thesequestionnaires can be distributed via the notification system.Additionally, the audit tab 526 enables auditor to conduct informationtechnology (IT) audits using specialized questionnaires and reportssupplied for this purpose. These IT-specific features include reportsfor checking database security, function security, network security,physical access security, applications configurations, and applicationsconfiguration change history.

Management tab 532 enables managers of the audit department to createaudit project templates and associate audit project templates withbusiness processes. The audit templates are used as the standardworkplan when auditing the associated business process. The managementtab 532 also includes staff planning capability and skills managementcapability to help audit department managers ensure they have the rightnumber of competent auditors to ensure the processes are in control.

Set up tab 538 enables auditors and audit department managers to performthe administrative functions such as assigning the audit schedules toorganizations or business processes, defining segregations of duties,and recording incompatible functions. Audit can be scheduled on anorganizational basis. For example, you may choose to audit the accountsreceivable department every six months.

Segregation of duties is implemented to prevent employee malfeasance.Set up tab 538 allows auditors to define pairings of specific functionswithin one or more business processes that must not be available to thesame user. In an embodiment of the invention integrated with a set ofworkflow-enabled application, the workflow-enabled applicationsautomatically record the identity of the user performing each functionin a business process. This is compared with the pairings of segregatedfunctions defined by the auditors to ensure segregation of duties.

Similarly, set up tab 538 enables auditors to record a set of prohibitedfunctions for each function in a business process. For example, a userhaving access to a create accounts payable invoice should not also haveaccess to functions to create suppliers and enter purchase orders.Otherwise, there is a risk that the user can create fictitious suppliersand have the enterprise disperse funds to them.

FIG. 6 is a block diagram of a method 600 for creating a businessprocess according to an embodiment of the invention. At step 605, abusiness process is defined. A business process can be defined fromscratch using a workflow system, or by selecting a predefined businessprocess from the business process library. A predefined business processfrom the business process library can also be modified to create abusiness process tailored to a specific purpose within an enterprise.

At step 610, procedure documents are associated with the businessprocess defined in step 605. The procedure documents providedocumentation for auditing the business process. In an embodiment,predefined procedure documents are associated with a predefined businessprocess in the business process library. As business processes areselected from the library and configured for use in the enterprise, theassociated procedure documents are also selected and designated for useduring audits of the business process. In a further embodiment, apredefined procedure document can be modified to create a proceduretailored to a specific need within the enterprise.

At step 615, process risks are associated with the business process.Process risks can be selected from a predefined set of risks associatedwith a business process in the business process library. In anembodiment, process risks can be automatically associated with abusiness process based upon the organization using the business process.In a further embodiment, auditors can associate additional risks, eitherpredefined or newly created, with the business process.

At step 620, key accounts are associated with the business process. Keyaccounts are financial accounts impacted by the business process and itsassociated risks. In an embodiment, the association of key accounts witha business process is used to create impacted financial statements,discussed elsewhere in this application.

Step 625 determines the risk controls associated with the businessprocess. In an embodiment, the set of risks associated with the businessprocess in step 615 determines a corresponding set of risk controls instep 625. In this embodiment, a set of predefined risks is associatedwith a corresponding set of predefined controls intended to mitigatethese risks. In step 625, an auditor can review the controls associatedwith the business process. An auditor can add, remove, or modify thecontrols as he or she sees fit to tailor the controls to the needs ofthe enterprise.

Similarly, step 630 determines the risk control reports associated withthe risk controls. Control reports, as discussed above, enable auditorsto review the control and performance objectives associated with abusiness process, and to add additional control and performanceobjectives in the form of KPI to business process. In step 630, auditorscan review the control reports associated with the business process, andcan add, remove, or modify the control reports as he or she sees fit totailor the control reports to the needs and process objectives of theenterprise.

FIG. 7 is a block diagram 700 of a portion of an embodiment of theinvention for monitoring the performance of a business process. Abusiness process 705 is associated with a key performance indicator 710.The key performance indicator determines a quantitative valuerepresenting the performance of the business process. For example, a keyperformance indicator 710 can be the average time to ship a product, theamount of accounts receivable pass due, or any other attribute derivedfrom a business process.

The value of the key performance indicator is compared with a KPI targetvalue 715. A result of this comparison is used to create a performancereport 720 describing the business process's 705 performance incomparison to its objectives. The KPI target value 715 can be derivedfrom a performance objective defined by the organizational unit 725implementing the business process, or alternatively as discussed above,set by an auditor from the audit manager.

In an embodiment, the key performance indicator 710 is determined by aperformance management framework application. The value of the keyperformance indicator 710 is determined as frequently as needed.Embodiments of the invention determine the key performance indicator's710 value on a continuous basis, while alternate embodiments determinethis value at other time intervals, such as daily, weekly, monthly,quarterly, and/or yearly.

FIG. 8 is a block diagram 800 illustrating the association of a businessprocess with process risks, controls, and control reports according toan embodiment of the invention. Business process 805 is associated withkey performance indicators 835, KPI target values 840, and anorganizational unit 845 in a manner similar to that described above withregard to FIG. 7. Business process 805 is additionally directlyassociated with organizational unit 845, so that auditors can view allof the business processes associated with an organizational units, orall of the organizational units associated with a business process.

Business process 805 is associated with process risks 810. The processrisks 810 are associated with process risk controls 815 used to mitigatethe process risks 810. Process risk controls 815 are associated with theKPI target value 840 to enable comparison of a process risk control'sKPI values with their corresponding KPI target values 840.

Process risk controls 815 are further associated with system options 820and profile options 825. As discussed above, one type of process riskcontrols can be implemented using the profiles and configurations of oneor more workflow-enabled applications. The system options 820 andprofile options 825 are associated with the process control change log830, which records the change in the process risk controls 815 overtime.

Process risk controls 815 are also associated with the process riskcontrol report 850. The process risk control report 850 createssummaries and reports of the process risk controls, enabling auditorsand managers to monitor the performance of process risk controls. Theprocess risk control report 850 employs a sample report 855 as atemplate for creating reports. The process risk control report 850 cancreate performance reports 860 summarizing the performance of a processrisk control relative to a KPI Target value 840. Additionally, theprocess risk control report 850, in conjunction with the process controlchange log 830, can create a change report 865 summarizing the changesto the process risk controls 815 over time.

A great deal of the time and effort in an audit is spent verifying thebusiness processes that an enterprise is using. Enterprises often have aglobal or standard business process. For example, there may be astandard business process for running an Order Desk. Auditors canauthorize the standard process as the standard way of running Order Deskoperations for all companies in the enterprise. However, a given companyor organization unit within the enterprise may be running a derivativeor variation of the standard process. Deviations from the approvedstandard process may be justified in terms of local legal framework orcustoms. For example, some countries mandate the number of digits in ajournal numbering scheme.

When the derivative process is audited, the auditors must determinewhether the derivative process introduces any additional risks. Anyadditional risks must be evaluated by auditors and/managers. If therisks of the derivative process are acceptable, then the derivativeprocess is approved. Depending on the nature of the risks introduced bya derivative process, approval may be required from one or more auditorsor managers.

The audit manager enables enterprises to formalize the approval ofbusiness processes and their derivatives. The workflow system acts as arepository of all of the business processes of the enterprise. In anembodiment employing workflow-enabled applications to implement thebusiness processes, derivative processes are automatically added to theworkflow system as organizational units change their operations. In analternate embodiment, organizational units provide the workflow systemwith descriptions of their business processes manually. The workflowsystem associates derivative business processes with their implementingorganizational units.

The audit manager compares the business processes of an organizationalunit with the standard global business process already approved by theenterprise to identify deviations from the standard business process.Auditors can view each deviation and its approval status (e.g. approved,unapproved, or approval in progress), issue approval requests to theappropriate auditors and managers through the notification system, andmonitor any follow up discussions or actions undertaken in eitherapproving the derivative process or bringing the derivative process backin line with the approved global process. Once a derivative process hasbeen approved, it is added to the repository of approved businessprocesses and will be available to auditor in future audit cycles.Additionally, the approvals, justifications, and discussions related toprocess deviations are also included as a record of the approval of thederivative process.

FIG. 9 is a block diagram 900 of a portion of an embodiment of theinvention for approving a variation of a business process. The de factobusiness process 905 is compared with the organizational businessprocess 915. The organizational business process 915 inherits the globalapproved business process and any changes associated with theorganizational unit's business processes from the organizational unit920. Any deviations from the approved business process are identifiedand subject to an approval process. As deviations are accepted asbusiness process exceptions 910. Additionally, users can requestapproval for changes to the standard business process.

In response to the initiation of an approval process, either arisingfrom a user request or from the identification of a deviation in the defacto business process, the business process change monitor notifies oneor more responsible users associated with the business process. Thenotification identifies the deviation (or requested deviation).Responsible users can include managers, auditors, and attorneys, who areresponsible for determining whether the deviation is acceptable frombusiness, financial, and legal perspectives. Each notified user canapprove or disapprove of the deviation. The approval decision and anycomments from each notified user are shared with the other users.Notified users can discuss the deviation using the notification system,such as the threaded discussion capability, until a consensus isreached. Based on the decision, the deviation can be approved andimplemented, or disapproved and removed. The record of the approvalprocess is preserved to document the changes to the business process.

FIG. 10 is a block diagram 1000 of the association of a business processwith a financial account for creating an impacted financial statementand auditing sample transactions in an embodiment of the invention Abusiness process 1005 is associated with one or more key financialaccounts 1010. The financial accounts 1010 are associated with a set ofgeneral ledger transactions 1015 that impact the financial accounts1010. Auditors can select general ledger transaction samples 1020 forfurther scrutiny. In an embodiment of the invention, the association ofthe business process 1005 with key accounts 1010, general ledgertransactions 1015, and general ledger transaction samples 1020 enableauditors to view sample transactions associated with a business process.

In addition to scrutinizing sample transactions, auditors can initiatetesting steps to validate that a control is in place and is effective. Atesting steps module of the audit manager enables auditors to definesteps to validate controls. The steps can define a manual testingprocedures, for example to test the physical security of an item, or tocreate one or more reports searching for suspicious behavior. Forexample, to detect risks associated with “quid pro quo” orders betweenan enterprise and a customer/supplier, a supplier audit report or asupplier/customer netting report, which identifies entities that areboth customers and suppliers, can be created.

Additionally, a report can be created from one or more KPI monitored bythe performance management framework. For example, a report cansummarize purchases as a percentage of sales. Another type of report canmonitor the change in profile or system options effecting the behaviorof a business process. For example, a workflow-enabled accounts payableapplication can have options for activating or deactivating an audittrail, setting a default country, allowing folder customization, andenabling/disabling sequential numbering. Frequent changes in theseoptions can indicate suspicious activity warranting furtherinvestigation.

FIG. 11 illustrates a block diagram 1100 of the association of a set oftesting steps with a business process. The organizational unit businessprocess 1105 is associated with a testing procedure 1109. The testingprocedure has several different testing paths used to validate thebusiness process and its controls. First, the testing procedure isassociated with a set of risks addressed 1111 by the business process.These general risks are further refined into a set of specific processrisks 1113. Each process risks can be associated with one or morecontrols 1117.

In a second testing path, the testing procedure 1109 is associated witha set of controls verified 1119. The controls verified 1119 are thecontrols validated as adequate for the business process. The controlsverified 1119 are derived from the set of risk controls 1117. Riskcontrols 1117 are associated with a risk 1115. Controls 1121 areassociated with the risks 1115 to determine the set of risk controls1117.

In a third testing path, the testing procedure 1109 is associated withone or more test steps 1125. Each test step is associated with one ormore control reports 1123 reporting the value of one or more KPIassociated with a control 1121.

Another aspect of the invention is a hosted audit service. Although theaudit manager is ideally tailored for integration with a workflow systemand a set of workflow-enabled applications, some enterprises do not havethis degree of application integration. Other enterprises may be usingincompatible workflow applications.

To address the audit needs of these enterprises, a hosted audit serviceleverages the process library and associated process procedures, risks,and controls to provide an audit “package” tailored to the needs of theenterprise. FIG. 12 illustrates a block diagram 1200 of a hosted auditservice according to an embodiment of the invention. Auditors can accessthe hosted audit service 1205 to select business processes from theprocess library 1215 equivalent to the enterprise's business practices.Because the process library 1215 includes business processes based onstandard business and industry practices, it is very likely someprocesses in the process library 1215 will closely resemble theenterprise's actual business practices.

Based on the auditor's selection of business processes, the hosted auditservice 1205 creates an audit procedures manual from the set of processprocedures 1220. As discussed above, the process procedure documents areassociated with the appropriate business processes. The hosted auditservice 1205 leverages this association to create an audit proceduremanual tailored to the business practices of the enterprise. Theenterprise's auditors can follow the audit procedures manual to auditthe business practices of the enterprise.

Additionally, the set of business processes 1215 is associated with setsof process risks 1225 and process controls 1230. The hosted auditservice 1205 can create a list of the associated risks and controls forthe business processes selected by the auditor. Auditors can use thislist of risks and controls to verify that their enterprise has adequatecontrols and that all possible risks are addressed.

Unlike some of the above-discussed embodiments of the audit manager,which actually implement business processes and associated controls inworkflow-enabled applications, an embodiment of the hosted audit servicedoes not execute business processes or controls. However, thisembodiment of the hosted audit service does provide auditors with acustom-tailored audit “package” that can be manually implemented intheir enterprise. This provides substantial time and cost savings forauditors as compared with having to develop their own audit proceduresinternally or with outside consultants.

Additionally, the hosted audit 1205 provides auditors with a centralinterface to all audit related tasks. In an embodiment, the hosted auditservice 1205 provides a central interface similar to audit manager 305.The hosted audit service 1205 enables auditors to create and manageaudit projects. This embodiment of the hosted audit service 1205provides auditors with planning functions, task assignment functions,progress tracking functions, communication functions, and documentmanagement functions, similar to those described for audit manager 305.The hosted audit service 1205 can be used to schedule auditsautomatically.

The hosted audit service 1205 enables auditors to audit issueswarranting further investigation, follow ups to audit issues, andresolutions of audit opinion differences. In a further embodiment, thehosted audit service 1205 includes a threaded discussion capability isused to resolve audit opinion differences. The notification system andits threaded discussion capabilities are also used by the hosted auditservice to conduct management surveys and to enable anonymous“whistleblower” reporting. The hosted audit service 1205 can store andmanage supporting documentation in a document management system andincludes specialized computer-aided audit tools, such as RatioCalculators, Anomaly Detectors, Sampling Methods, Process ControlsReports, and Fraud Detectors.

In a further embodiment of this aspect of the invention, the hostedaudit service 1205 is provided to auditors via a web-browser interface.Auditors access the hosted audit service 1205 via a web browser toselect business processes appropriate to their enterprise, to create anddownload an audit procedures manual based on the selected businessprocesses, and to create and download a list of risks and controls.Additionally, the hosted audit service 1205 provides audits with acentral interface to all audit related tasks similar to that in screendisplay 400 discussed above.

In a further embodiment, the audit manager includes a registry ofincompatible business functions. FIG. 13 illustrates a registry ofincompatible business functions 1300 according to an embodiment of theinvention. The registry of incompatible business functions is createdfrom a library of business processes or duties, such as process library250 or process library 1215. As the process library is created, acorresponding list of incompatible business functions is created foreach business function in a business process. If a business functionrepresents a set of related sub-functions, each sub-function can inherita list of incompatible business functions from the parent businessfunction, and further may include additional sub-functions. When abusiness process is selected from the library by auditors for inclusionin the enterprise, the business functions of the selected businessprocess and its corresponding list of incompatible business functionsare added to the registry 1300. In a further embodiment, auditors canadd additional business functions to the registry. As an auditor adds abusiness function to an enterprise, the audit manager prompts theauditor to select incompatible business functions.

For example, registry 1300 is a table having a list of businessfunctions duplicated on both axes. The arrangement of registry 1300 isfor purposes of illustration, and alternate embodiments of the registrycan include different data structures. In registry 1300, the “CreateSupplier” function is incompatible with both the “Pay Invoice” and“Generate Invoice” function, as indicated by the “X” in thecorresponding columns. Similarly, the “Conduct Inventory” and “AdjustCycle Count” business functions are incompatible with each other.

In an embodiment, a reporting function of the audit manager ensures thatfunctions are segregated among employees according to theincompatibilities listed in registry 1300. To create a report, the auditmanager compares the business functions in the registry 1300 with thebusiness functions assigned or available to each employee. Employeeshaving access to two or more incompatible business functions are addedto the report. The report may include information for identifyingemployees having incompatible duties, such as their name andorganization, as well as information concerning the incompatiblefunctions, such as a list of all incompatible functions assigned to eachemployee on the report.

In another embodiment, an alert function of the audit manager providesauditors with a warning when incompatible duties are assigned to anemployee. In this embodiment, as duties are assigned to an employee, theassigned duty and any other previously assigned business function arecompared with the business functions in registry 1300 to identify anypotential incompatibilities. If an incompatible business function hasbeen assigned to an employee, an alert can be sent to auditors and/ormanagement. In an embodiment, the performance management frameworkmonitors the processes added to each employee and compares addedfunctions with the registry 1300. In a further embodiment, thenotification system communicates alerts of incompatible duty assignmentswith auditors and/or management. In still another embodiment, the auditsystem may be further integrated with the workflow applications andprevent the assignment of incompatible functions to employees.

In a further embodiment, one or more risks, similar to the process risks265 discussed above, can be associated with each set of two or moreincompatible functions. The risks associated with sets of incompatiblefunctions can be classified into categories, such as the type of risk,the organizations affected by the risk, and the probability and severityof the risk. Each set of two or more incompatible functions can beassociated with one or more risks, and conversely, each risk can beassociated with one or more sets of incompatible functions.

FIGS. 14A and 14B illustrate example risks associated with pairs ofincompatible functions. FIG. 14A illustrates an example set 1400 ofincompatible functions. In this example, set 1400 is one of the sets ofincompatible functions defined in registry 1300. Set 1400 includesincompatible functions “Conduct Inventory,” 1405, and “Adjust CycleCount,” 1410. A set of risks 1415 is associated with the set 1400 ofincompatible functions. The set of risks 1415 includes “Risk of employeestealing inventory.” This risk, along with any other risks in the set ofassociated risks 1415, can be assigned to one or more categories, forexample “Theft.” Each risk in the set of associated risks can beassigned a risk probability and risk impact. For example, “Risk ofemployee stealing inventory” may have a “high” probability of a riskoccurring and a “medium” level of impact to the enterprise.

Similarly, FIG. 14B illustrates another example set 1450 of incompatiblefunctions associated with a set of risks 1455. In example set 1450, thefunctions “Create Supplier,” 1460, “Generate Invoice,” 1465, and “PayInvoice,” 1470 are associated with the set of risks 1455. The set ofrisks 1455 includes the risk “Employee paying a phony supplier.”

In a further embodiment, the sets of risks associated with incompatiblefunctions are derived from standard accounting references, such as thereport of the Treadway commission. In a further embodiment, the sets ofrisks associated with incompatible functions may be provided by anenterprise's internal or external auditors. The sets of risks and theirrespective associations with sets of incompatible functions may be basedon standard accounting references and modified to include risks specificto an enterprise.

The sets of risks associated with sets of incompatible functions can beused by the audit manager application and hosted audit service in thesame way that risk associated with business processes in the processlibrary are used. For example, risks associated with a set ofincompatible functions can be included in audit reports. Auditors canview all of the risks in an enterprise introduced by incompatiblefunctions in an audit report, and view each incompatible functionassignment associated with a risk, risk category, risk probability, orrisk impact.

Incompatible functions and their associated risks can trigger additionalaudit tasks to be resolved in the audit manager application. The auditmanager application tracks the resolution of these additional audittasks for future reference. As an example, for some incompatiblefunction assignments, especially in smaller enterprises, an auditor maydecide to continue to allow an employee to performs several incompatiblefunction because the risk is outweighed by the burden to the enterpriseto reassign one or more of the incompatible functions to a differentemployee. In these situations, the audit manager application will notethe auditors' discussion and approval of this issue.

The audit manager application can also generate impacted financialstatements including risks associated with incompatible functions. Asdiscussed above, an impacted financial statement can be created from theset of business processes, risks, and controls. The risks includesprocess risks associated with business processes and risks associatedwith incompatible functions. An impacted financial statement is afinancial report, such as a balance sheet, annotated with informationfrom the set of business processes, risks, and controls. A user can viewthe impacted financial statement as an electronic document. By selectingone or more line items on the impacted financial statement, users canview the risks, controls, and processes impacting the selected line.

In an embodiment, the audit system formally communicates the results ofan audit to company officers. Company officers can review the auditresults in detail to identify specific risks, their associated processcontrols, and the potentially impacted financial accounts. If thecompany officers decide to certify, or warrant, the audit results, forexample to comply with the Sarbanes-Oxley Act, the audit systemdocuments the company officers' approval.

FIG. 15 illustrates an example screen display 1500 of an audit systemthat summarizes an audit according to an embodiment of the invention. Inthis example, a company officer can view screen display 1500 byselecting the tab 1505. Screen display 1500 includes a certificationsection 1510, an ineffective financial items section 1515, and summarysection 1520.

Certification section 1510 displays whether the current audit has beenwholly or partially certified as well as any comments or detailspertaining to the audit certification. The certification of auditresults by company officers using the audit system is discussed in moredetail below.

Ineffective financial items section 1515 displays any financial itemsassociated with business processes designated by auditors as havingineffective financial controls. As discussed above, the auditors usingthe audit manager designate business processes as having effective orineffective financial controls during an audit. In an embodiment, theaudit manager automatically identifies the financial items associatedwith ineffectively controlled business processes and adds thesefinancial items to the ineffective financial items section 1515. Foreach financial item listed in section 1515, the company officer or otheruser can select the item to reveal additional information about theineffective controls associated with the financial item.

Summary section 1520 summarizes the results of the audit. In particular,summary section 1520 includes audit results that might be a cause forconcern for company officers. For example, summary section 1520 includeschanges to business processes 1525, uncertified processes 1530, andaudit evaluation 1535. Audit evaluation 1535 lists business processeswith ineffective controls, organizational variances to businessprocesses with ineffective controls, unmitigated risks, and specificineffective controls. As with other sections, the corporate officer orother user can select an item in section 1520 to view additionaldetails.

FIG. 16 illustrates an example screen display 1600 of an audit systemthat summarizes audit information by financial account according to anembodiment of the invention. A company officer or other user can viewscreen display by selecting tab 1603. Screen display 1600 organizesaudit results by their associated financial items. Column 1605 presentsa list of all of the financial items related to the audit. In anembodiment, column 1605 is automatically populated by the audit systemusing the associations between financial items, business processes,organizations, risks, and controls, as well as the audit results createdusing audit projects, as discussed above. In the example screen display1600, column 1605 presents a hierarchical list of financial items. Thisenables company officers or other users to view general financial items,or to view one or more sub-items associated with a general financialitem. Sub-items can be selectively hidden or shown to provide thecompany officer with the desired granularity of information.

For each financial item, or sub-item if shown, column 1610 lists thenumber of associated business processes pending certification. Column1615 lists the number of business processes associated with a financialitem or sub-item that are certified, but have issues. Similarly, foreach financial item or sub-item, column 1620 lists the number ofassociated business processes with ineffective controls, column 1625lists the number of associated organizations with ineffective controls,column 1630 lists the number of associated unmitigated risks, and column1635 lists the number of associated ineffective controls. For each itemlisted in columns 1610-1635, selecting the item will display detailedinformation on the specific processes, organizations, risks, or controlsrepresented by that item.

Set of columns 1640 lists the auditors' evaluation of the associatedfinancial item, as well as the name of the auditor and the date of theaudit.

FIG. 17 illustrates an example screen display 1700 of an audit systemthat summarizes audit information by organization according to anembodiment of the invention. A company officer or other user can viewscreen display by selecting tab 1703. Screen display 1700 organizesaudit results by their associated organizations within the businessenterprise. Column 1705 presents a list of all of the organizations inthe enterprise related to the audit. In an embodiment, column 1705 isautomatically populated by the audit system using the associationsbetween financial items, business processes, organizations, risks, andcontrols, as well as the audit results created using audit projects, asdiscussed above. In the example screen display 1700, column 1705presents a hierarchical list of organizations. This enables companyofficers or other users to view the audit information associated withthe primary business organizations of their enterprise, or to view auditinformation of one or more sub-organizations under a primary businessorganization. Sub-organizations can be selectively hidden or shown toprovide the company officer with the desired granularity of information.

For each organization, or sub-organization if shown, column 1710 liststhe number of associated business processes pending certification.Column 1715 lists the number of business processes associated with anorganization that are certified, but have issues. Similarly, for eachorganization, column 1720 lists the number of associated businessprocesses with ineffective controls, column 1730 lists the number ofassociated unmitigated risks, and column 1735 lists the number ofassociated ineffective controls. For each item listed in columns1710-1735, selecting the item will display detailed information on thespecific processes, risks, or controls represented by that item.

Set of columns 1740 lists the auditors' evaluation of the associatedfinancial item, as well as the name of the auditor and the date of theaudit.

Using the screen displays such as 1500, 1600, and 1700, a companyofficer can review the results of an audit and quickly identify thosebusiness processes, organizations, risks, and controls that arepotentially troublesome. The company officer can then focus theirattention on resolving these matters. Once the company officer hasreviewed the audit results to his or her satisfaction, he or she cancertify the audit results. Certification officially records the companyofficer's approval of the audit results, which can be in the form of anaudit report, an audited financial statement, or other type of document.Additionally, statutes and regulations, for example the Sarbanes-OxleyAct, require company officers to certify their audit results.

FIG. 18 illustrates an example screen display 1800 of an audit systemthat enables a company officer to certify audit results according to anembodiment of the invention. Section 1805 displays information on thefinancial statement to be certified by a company officer. Included insection 1805 is the name, date, and type of audit information, forexample a financial statement, to be certified by the company officer.

Section 1810 displays the certification result. If the company officerapproves of the audit results and decides to certify the audit results,section 1810 displays the company officer's certification. Section 1810includes one or more input fields for recording the company officer'scertification and his or her comments. In an embodiment, section 1810includes an input field for capturing an electronic signature of thecompany officer. In another embodiment, the company officer'scertification can be recorded and authenticated by other systems.

Once a company officer has certified the audit results, the auditresults and the certification are stored for future reference. In theevent that the business enterprise's financial results need to berestated, the stored audit results can be retrieved to show that all ofthe financial items, business processes, organizations, risks, andcontrols were carefully considered by the company officer beforecertification. Thus, the saved audit results provide the company officerwith a well-documented decision trail demonstrating their good faith incertifying the audit results.

In a further embodiment, the audit system includes a system forcreating, deploying, and analyzing surveys to perform risk assessment.As discussed in detail below, the audit system can generate surveyquestionnaires. Survey questionnaires can be generated automatically bythe audit system or manually by auditors. Surveys can be associated withone or more contexts, which include an enterprise, an organizationwithin the enterprise, a business process, a risk, a control, or anycombination thereof. Using the process library and the associated setsof process risks and process controls, the audit system canautomatically determine the set of individuals that should participatein the survey. Using the core applications discussed above, the auditsystem can then distribute survey questionnaires to the set ofindividuals and collect the survey results. Survey results can beaggregated to create risk assessments detailing the perceived risks tothe survey context. Additionally, survey results and risk assessmentscan be saved for future reference or to document an enterprise'sgood-faith efforts to comply with its legal obligations.

In an embodiment, auditors can manually design survey questionnaires.FIGS. 19A-H illustrate a set of example screen displays of an auditsystem that enables the creation of a survey according to thisembodiment of the invention. FIG. 19A illustrates a screen display 1900showing the initialization of a new survey questionnaire. A surveyquestionnaire, or script, is a sequence of survey questions to bepresented to a survey recipient. In screen display 1900, an auditor canspecify a name, a description, and a language for a new survey script.Further embodiments of the invention can include additional surveyquestionnaire attributes.

FIG. 19B illustrates a screen display 1912 showing the management ofpanels in the survey questionnaire according to an embodiment of theinvention. In this embodiment, survey questionnaires can be divided intoone or more panels. Each panel represents a separate set of questions.In a typical embodiment, panels of questions are presented one at a timeto the survey recipient. After completing a panel, the surveyquestionnaire presents the next panel, if any, in the sequence.

Screen display 1912 includes a list 1914 of all of the panels in thesurvey questionnaire. Auditors can use the set of controls 1916 tocreate, edit, copy, move and delete panels in the list 1914. For eachpanel, a list entry 1918 displays the name of the panel and thedestination panel, which is the next panel in the sequence of panels inthe survey questionnaire. In an additional embodiment, list entry 1918allows auditors to specify branching sequences of panels in response tothe survey recipients' answers. By creating and editing list entriessuch as list entry 1918, auditors can create multiple panels and arrangethese panels into one or more sequences.

FIG. 19C illustrates a screen display 1925 showing the management ofpanel attributes in the survey questionnaire according to an embodimentof the invention. In screen display 1925, auditors can specifyattributes of a panel, including the panel name, explanatory text on thepanel, other text formatting attributes, and the next panel in thesequence, such as a specific panel, the next panel in the list 1914discussed above, or the end of the survey questionnaire.

FIG. 19D illustrates a screen display 1937 showing the creation of a setof questions for a panel in the survey questionnaire according to anembodiment of the invention. Screen display 1937 includes a list 1939 ofall of the questions on a given panel in the survey questionnaire.Auditors can use the set of controls 1941 to create, edit, copy, moveand delete questions in the list 1939. For each question, a list entry1943 displays the name of the question, the user interface element usedto collect the its answer, for example, a radio button, a text area, ora dropdown menu, and whether a survey recipients answer affects thesequences of panels in the questionnaire, for example, by branching to adifferent panel.

FIG. 19E illustrates a screen display 1950 showing the management ofquestion attributes for a question on a panel in the surveyquestionnaire according to an embodiment of the invention. In screendisplay 1950, auditors can specify attributes of a question, includingthe question name, the question text and the user interface element usedto collect its answer from a survey recipient.

FIG. 19F illustrates a screen display 1962 showing the management ofquestion answer attributes for a question on a panel in the surveyquestionnaire according to an embodiment of the invention. Auditors havethe option of defining questions in a multiple-choice, true/false, orsimilar format. In screen display 1962, auditors can specify a set ofpotential answers for a question on a panel in the survey questionnaire.Screen display 1962 includes a list 1964 of all of the potential answersto a question. Auditors can use the set of controls 1966 to create,edit, copy, move and delete answers in the list 1964. For each answer, alist entry 1968 displays the label and value of a potential answer, forexample “Agree” or “Disagree,” a default answer value, and optionallythe next panel of questions to be selected if the survey recipientselects a given answer.

Following the definition of all the panels and their associatedquestions and answers in a survey questionnaire, auditors can specifythe deployment of the survey questionnaire to one or more surveyrecipients. FIG. 19G illustrates a screen display 1975 showing themanagement of the deployment of a survey questionnaire according to anembodiment of the invention. In screen display 1975, auditors can assigna survey questionnaire to a specific survey campaign in section 1977. Asurvey questionnaire can be used in multiple survey campaigns, enablingauditors to use a survey questionnaire to gather information frommultiple sets of recipients and/or at multiple intervals. Auditorsspecify the deployment date and the period for survey responses insection 1979. Section 1981 allows auditors to view the status of surveyresponses for a survey campaign, for example, whether recipients havecompleted or abandoned responding to a survey questionnaire.Additionally, a survey campaign can be automatically repeated atspecified intervals (for example, on a quarterly basis) to generateongoing risk assessments.

In addition, auditors can specify the set of survey recipients toreceive a survey questionnaire. In an embodiment, auditors can specifythe survey recipients directly. In an additional embodiment, auditorsassociate a survey campaign with a context, such as an enterprise, anorganization within the enterprise, a business process, a risk, acontrol, or any combination thereof. Using the process library and theassociated sets of process risks and process controls, the audit systemcan automatically determine the set of individuals that shouldparticipate in the survey.

FIG. 19H illustrates a screen display 1988 showing the set of answersprovided by an individual survey recipient. Auditors can view answersprovided by each survey recipient to assess potential risks with theassociated survey context. FIG. 20 illustrates an example screen display2000 of an audit system presenting a survey according to an embodimentof the invention. Screen display 2000 illustrates a single panel in anexample survey questionnaire, as presented to a survey recipient.

FIGS. 21A-B illustrate a set of example screen displays of an auditsystem presenting an assessment of an enterprise according to anembodiment of the invention. Screen display 2100 of FIG. 21A illustratesthe initiation of a risk assessment associated with one or more surveycampaigns. In this embodiment, an auditor can create a risk assessment.A menu 2105 enables auditors to configure aspects of the riskassessment, including one or more associated survey campaigns to be usedto gather data for the assessment and one or more contexts for the riskassessment. As discussed above, a risk assessment context can include anenterprise, an organization in the enterprise, a business process, arisk, a control, or any combination thereof. In the components section2110, an auditor can select components to be included in the riskassessment, such as control activities, control environment, informationand communication, monitoring, risk assessment activities, or othercomponents.

FIG. 21B illustrates a screen display 2150 presenting the results of anexample risk assessment according to an embodiment of the invention. Inan embodiment, the audit system distributes the survey campaignsassociated with the risk assessment to the appropriate surveyrecipients. The audit system collects and records each recipient'ssurvey results. Additionally, the audit system aggregates surveyinformation to create a risk evaluation. In an embodiment, a componentis given a positive risk assessment value if all of the survey resultsare positive for survey questions associated with the component.Additionally, a component is given a negative risk assessment value ifany survey results are negative for survey questions associated with thecomponent. Section 2160 displays the risk assessment value, representingan aggregate of the survey results, for each component included in therisk assessment. Section 2160 includes the name of each componentevaluated, an effectiveness value (for example, “highly effective” or“ineffective”), and comments explaining the effectiveness value.

In an additional embodiment, the audit system can generate surveyquestionnaires automatically. In this embodiment, auditors specify oneor more contexts to be included in a risk assessment. Auditors can alsospecify one or more components to be included in the risk assessment. Asurvey question library includes a set of questions and/or questiontemplates. In an embodiment, the survey question library also associateseach question with one or more contexts and/or components. Based uponthe specified contexts and components, the audit system selects aportion of the set of questions to create a survey questionnairematching the specifications of the risk assessment. Additionally, usingthe process library, the associated sets of process risks and processcontrols, and the list of employees associated with each process, theaudit system can automatically determine the set of individuals thatshould participate in the survey.

FIG. 22 illustrates is a block diagram 2200 illustrating an embodimentof the invention. Block diagram 2200 is similar to diagram 300 shown inFIG. 3 and discussed above. In block diagram 2200, the portion 2205 ofthe audit system includes a survey question library 2210. The surveyquestion library 2210 is connected, either directly or indirectly, withthe set of process controls, the process library, the set of processprocedures, the set of process risks, and the core applications.Additionally, the audit manager 305 is associated with the assessmentmanager 2215, which enables the initiation, processing, and review ofrisk assessments, as described above.

In a further embodiment, survey results can be used to predict auditresults for one or more controls, including whether it is likely thatany controls will fail the audit. In this embodiment, pattern detectionand data mining techniques can be applied to one or more sets of surveyresults to predict when a control is likely to be rated ineffective andtherefore the associated risk to be unmitigated. For example, a surveyquestion might ask users to rate the professional standards of anorganization's procurement department on a scale of 1 to 5. If previousaudit results have revealed a correlation between the previous surveyresults of this question (e.g. a rating of 3 or less) and a failingaudit result, then the results of the current survey can be used toassess the likelihood of failure of the controls associated with thissurvey question. For example, survey results of 3 or less can trigger animmediate audit or greater scrutiny during upcoming audits.Additionally, if survey results are greater than 3, but have been slowlydeclining over time, the audit system can alert auditors to thisdownward trend towards a potential control failure, enabling correctivemeasures to be instituted prior to the failure of the control.

In an embodiment, the library of survey questions and associatedcontrols include a set of default correlations between survey questionresults and the likelihood of control failure in subsequent audits. Theset of default correlations reflect the analysis of survey questionresults and audit results from one or more enterprises over an extendedperiod of time. The set of default correlations can be created using anywell-known statistical analysis technique to find multivariablecorrelations between survey question results and audit results.

In a further embodiment, the set of correlations between survey questionresults and audit results can be updated after each survey and audit inan enterprise. Thus, an enterprise can start with the set of defaultcorrelations when the audit system is initially installed and graduallyupdate its set of correlations to reflect the analysis of its own pastsurvey question results and audit results. In one embodiment, anexponentially-weighted moving average function is used to update the setof correlations between survey question results and audit results. Anexponentially weighted moving average function assigns weights to theresults of one or more survey questions over time. The weighted sum ofthe survey question results are used to determine a failure probabilityscore, indicating the likelihood that the control will fail during thenext audit period. More recent survey question results are weighted moreheavily than older survey question results. After each audit, weightsare increased for survey questions that correctly predict audit resultsand decreased for survey questions that do not correctly predict auditresults.

in an alternate embodiment, survey questions and controls are arrangedon orthogonal axes of a table. Each table entry is at the intersectionof a survey question and a control and had a value indicating whetherthere is a correlation between the survey question and the control. Eachtable entry also has a weighting estimating the probability of a controlfailure from the associated survey question. These weightings can beadjusted after each audit to reflect the correlation between surveyquestion results and audit results.

Additionally, the reliability of each control can be stored in thecontrol library. One measure of the reliability of a control is oneminus the failure probability of the control. The reliability of eachcontrol can be carried over when the control is added to a newenterprise, organization, or process. Thus, audits can gauge theeffectiveness of adding new controls to a process by using the resultsof the same control in a different process.

FIGS. 23A-B illustrate an example correlation between survey questionresults and audit results according to an embodiment of the invention.FIG. 23A illustrates a table 2300 showing a pair of example surveyquestions 2305 and 2307 and the estimated reliability of an associatedcontrol for each of five possible survey question results. For example,the survey question 2305, “Does Payables always check for manual checkrequests if unmatched invoices are over 30 days old,” may be associatedwith a control “Check manual check requests if unmatched invoices areover 30 days old.” In this example, a survey question result of“Strongly Agree” corresponds to control reliability of 100%, a surveyquestion result of “Agree” corresponds to control reliability of 90%, asurvey question result of “Unsure” corresponds to control reliability of80%, a survey question result of “Disagree” corresponds to controlreliability of 70%, and a survey question result of “Strongly Disagree”corresponds to control reliability of 60%. Similar reliability estimatescan be associated with survey question 2307.

Following the completion of these survey questions and an audit, thereliability estimates for each survey question can be revised. FIG. 23Billustrates a table 2350 showing a pair of example survey questions 2362and 2370, the estimated reliability of an associated control for each offive possible survey question results, and the correlation betweensurvey question results and audit results. In this example, surveyquestion 2362 has a survey answer 2365 of “Strongly Agree” and an auditresult 2364 of “fail,” indicating that an audit determined that thecontrol associated with the survey question 2362 was ineffective atmitigating one or more risks. Similarly, survey question 2370 has asurvey answer 2380 of “Agree” and an audit result 2375 of “fail,”indicating that an audit determined that the control associated with thesurvey question 2370 was also ineffective at mitigating one or morerisks.

Because the reliability of these example controls estimated from surveyquestion results clearly contradicts the actual audit results of thesecontrols, the estimated reliability should be updated. In this example,the reliability of the survey answer “Strongly Agree” for question 2362and of the survey answer “Agree” for question 2370 are updated. In anembodiment, the reliability is updating using the formula:P1=(1−Alpha)*P0+(Alpha*Observation). In this formula, observation equals100% if the control is passes and equals 0% if the control is fails;Alpha is a weighting factor to give more or less weight to recentobservations; P1 is the revised relationship between the survey answerand the control reliability; and P0 is the previous relationship betweenthe answer and the control reliability. Applying this formula to theresults in table 2350, and using a value of 20% for Alpha, the estimatedreliability of the control associated with question 2362 when the surveyquestion result is “Strongly Agree” is equal toP1=(1−0.2)*1.0+0.2*0.0=0.8. Similarly, the estimated reliability of thecontrol associated with question 2370 when the survey question result is“Agree” is equal to P1=(1−0.2)*0.93+0.2*0.0=0.74. The reliability values2367 and 2377 are updated accordingly.

FIG. 24 illustrates a flowchart 2400 for audit operations according toan embodiment of the invention. Audit operations performed in accordancewith flowchart 2400 provide a logical and structured system forevaluating an enterprise and providing audit opinions on itsorganizations, processes, risks, and risk controls. In this embodiment,auditors first evaluate the set of controls 2405 associated with anenterprise. Using the associations between the controls and risksdefined by the audit system, as discussed above, auditors can identifyand evaluate the set of risks 2410 associated with the set of controls2405.

In an additional embodiment, each risk in the set of risks 2410 can beevaluated with reference to the audit results of its associatedcontrols. For example, one risk to an enterprise may be the risk thatmaterials purchased elsewhere at a discount price are fraudulentlyreturned to the enterprise for refund at full price. To mitigate thisexample risk, a set of associated controls may include: matching serialnumbers for materials previously sold by the enterprise to those ofmaterials being returned; matching sales orders with returnauthorizations; and receiving and inspecting materials before approvingrefunds. If the evaluation of the set of controls 2405 determines that,for example, two of these three controls are not being implementedcorrectly and thus have a negative audit opinions, then the audit systemcan assign a negative audit opinion to this risk when evaluating the setof risk 2410.

In a further embodiment, the audit system streamlines the evaluation ofrisks by providing auditors with a suggested audit opinion for each riskin the set of risks 2410 using the audit results from the set ofcontrols 2405. In an embodiment, each risk includes a criteria, rule, orheuristic used to determine a suggested audit opinion. For example, therisk of fraudulent returns discussed above may include a rule thatrequires the majority of its associated controls to have positive auditopinions. If this rule is violated, for example by two of three controlshaving negative audit opinions, then the audit system suggests anegative audit opinion for the risk as well. The audit system'ssuggested audit opinion can be accepted by an auditor or overridden. Ineither case, an embodiment of the audit system records the decision ofauditors for future reference.

A variation of this rule can require that the percentage of positiveaudit opinions for associated controls exceed a predetermined thresholdvalue. Alternatively, a rule could suggest a negative audit opinion ifany of the associated controls have negative audit opinions. In anotherembodiment, each control can be associated with a coverage valuerepresenting the portion of the risk mitigated by the control. The auditsystem can then determine the total amount of risk mitigated for eachrisk from the sum of the risk mitigation values for all of the controlsassociated the risk and deemed effective in evaluating the set ofcontrols 2405. The audit system can then evaluate the total riskmitigated for each risk and provide a suggested audit opinion. Ingeneral, the criteria, rules, or heuristics used by the audit system caninclude any arbitrary combination, comparison, and/or weighting of auditresults to determine a suggested audit opinion for each risk.

The results of the audits of the set of controls 2405 and the set ofrisks 2410 can be used to evaluate the set of processes 2415 of theorganization. In an embodiment, the set of processes 2415 are identifiedvia the associations defined by the audit system between controls,risks, and processes. Additionally, each process in the set of processes2415 can be evaluated with reference to the audit results of itsassociated risks and/or controls, in a similar manner to the evaluationof the set of controls 2410 discussed above. Continuing with the aboveexample, if the risk of fraudulent returns is associated with the returnof materials process, then a negative audit opinion for this risk cancarry trigger a negative suggested audit opinion for this process. Aseach process can be associated with multiple risks, the suggested auditopinion for a given process may be affected by the audit opinions ofeach of its associated risks. Similar to the concept of risk mitigationfor controls discussed above, in an embodiment, each risk associatedwith a process may include a risk severity value. Using these values,the audit system can determine a total risk impact value for eachprocess. The total risk impact value can then be used to determine asuggested audit opinion for the process.

The results of the audits of the set of controls 2405, the set of risks2410, and the set of processes 2415 can be used to evaluated the set oforganizations 2420 of an enterprise. As with the set of risks 2410 andthe set of processes 2415, the audit system can determine a suggestedaudit opinion for each organization from the audit results of itsassociated processes.

To evaluate the set of controls 2405, an embodiment of the audit systemincludes a set of audit procedures. Each audit procedure specifies oneor more actions that should be performed to evaluate the effectivenessof one of the set of controls 2405. In an embodiment, the set of auditprocedures is included in the set of process procedures 260 discussedabove.

In a further embodiment, the audit manager 305 includes projecttemplates for performing the set of audit procedures associated with theset of controls 2405 in a workflow-enabled project managementapplication as discussed above. In this embodiment, the workflow enabledproject management application defines the set of audit procedures asworkflows in the workflow system. An audit project template can includestandard audit procedures, document templates, and standard deliverablesneeded for an audit of an associated control. The audit manager 305 isinterfaced with a workflow-enabled project management application toenable collaboration between auditors by providing planning functions,task assignment functions, progress tracking functions, communicationfunctions, and document management functions. Task assignment functionsenable the project management application to locate available peoplewith the skill set to match assignments. Progress tracking functionsenable the project management function to monitor progress againstmilestones.

In a further embodiment, the set of audit procedures is included as partof a hosted audit service, such as the hosted audit service 1205discussed above. In this embodiment, auditors access the hosted auditservice to select controls from a control library that are equivalent tothe enterprise's business practices. Because the control libraryincludes controls based on standard business and industry practices, itis very likely a portion of the controls in the control library willclosely resemble the enterprise's actual business practices.

Based on the auditor's selection of controls, the hosted audit servicecreates an audit procedures manual from the set of audit procedures. Aswith the project templates discussed above, the audit procedures manualcan include document templates and standard deliverables needed for anaudit of an associated control. The enterprise's auditors can follow theaudit procedures manual to audit the set of control 2405 of theenterprise. The audit results for the set of controls 2405 can then beused to evaluate the set of risks 2410, the set of processes 2415, andthe set of organizations 2420.

Although the invention has been discussed with respect to specificembodiments thereof, these embodiments are merely illustrative, and notrestrictive, of the invention. For example, although the invention isdiscussed with reference to an audit manager application having numerousintegrated modular functions, the invention can implement each of thesefunctions in a separate or stand-alone form. Thus, the scope of theinvention is to be determined solely by the claims.

1. A method of auditing an enterprise, the method comprising: evaluatinga set of risk controls associated with the enterprise to produce a firstset of audit opinions; evaluating a set of risks associated with the setof risk controls to produce a second set of audit opinions; evaluating aset of processes associated with the set of risks to produce a third setof audit opinions; and evaluating a set of organizations associated withthe set of processes to produce a fourth set of audit opinions.
 2. Themethod of claim 1, wherein evaluating the set of risks includesdetermining a suggested audit opinion from a selection of audit opinionsincluding at least a portion of the first set of audit opinions.
 3. Themethod of claim 2, wherein determining the suggested audit opinionincludes applying a rule to the selection of audit opinions.
 4. Themethod of claim 3, wherein the rule includes a weighted combination of aset of risk mitigation values associated with the selection of auditopinions.
 5. The method of claim 1, wherein evaluating the set ofprocesses includes determining a suggested audit opinion from aselection of audit opinions including at least a portion of the firstand/or second set of audit opinions.
 6. The method of claim 5, whereindetermining the suggested audit opinion includes applying a rule to theselection of audit opinions.
 7. The method of claim 6, wherein the ruleincludes a weighted combination of a set of risk severity valuesassociated with at least a portion of the selection of audit opinions.8. The method of claim 1, wherein evaluating the set of organizationsincludes determining a suggested audit opinion from a selection of auditopinions including at least a portion of the first, second, and/or thirdset of audit opinions.
 9. The method of claim 2, further comprisingreceiving an audit decision from a user, the audit decision indicatingeither the acceptance of the suggested audit opinion or the rejection ofthe suggested audit opinion.
 10. The method of claim 9, furthercomprising storing the suggested audit opinion and the audit decision.11. The method of claim 5, further comprising receiving an auditdecision from a user, the audit decision indicating either theacceptance of the suggested audit opinion or the rejection of thesuggested audit opinion.
 12. The method of claim 11, further comprisingstoring the suggested audit opinion and the audit decision.
 13. Aninformation storage medium having a plurality of instructions adapted todirect an information processing device to perform a set of stepsincluding: evaluating a set of risk controls associated with theenterprise to produce a first set of audit opinions; evaluating a set ofrisks associated with the set of risk controls to produce a second setof audit opinions; evaluating a set of processes associated with the setof risks to produce a third set of audit opinions; and evaluating a setof organizations associated with the set of processes to produce afourth set of audit opinions.
 14. The information storage medium ofclaim 13, wherein evaluating the set of risks includes determining asuggested audit opinion from a selection of audit opinions including atleast a portion of the first set of audit opinions.
 15. The informationstorage medium of claim 14, wherein determining the suggested auditopinion includes applying a rule to the selection of audit opinions. 16.The information storage medium of claim 15, wherein the rule includes aweighted combination of a set of risk mitigation values associated withthe selection of audit opinions.
 17. The information storage medium ofclaim 13, wherein evaluating the set of processes includes determining asuggested audit opinion from a selection of audit opinions including atleast a portion of the first and/or second set of audit opinions. 18.The information storage medium of claim 17, wherein determining thesuggested audit opinion includes applying a rule to the selection ofaudit opinions.
 19. The information storage medium of claim 18, whereinthe rule includes a weighted combination of a set of risk severityvalues associated with at least a portion of the selection of auditopinions.
 20. The information storage medium of claim 13, whereinevaluating the set of organizations includes determining a suggestedaudit opinion from a selection of audit opinions including at least aportion of the first, second, and/or third set of audit opinions. 21.The information storage medium of claim 14, further comprising receivingan audit decision from a user, the audit decision indicating either theacceptance of the suggested audit opinion or the rejection of thesuggested audit opinion.
 22. The information storage medium of claim 21,further comprising storing the suggested audit opinion and the auditdecision.
 23. The information storage medium of claim 17, furthercomprising receiving an audit decision from a user, the audit decisionindicating either the acceptance of the suggested audit opinion or therejection of the suggested audit opinion.
 24. The information storagemedium of claim 23, further comprising storing the suggested auditopinion and the audit decision.